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NBA A-Z: Is Sacramento as good a market as Seattle?

Commissioner David Stern said last month at All-Star weekend in Houston that he didn't see a scenario in this saga where (Sacramento and Seattle) are happy, which means this topic is front and center leading up to next month's Board of Governors meeting that will decide the outcome.

If the NBA is keeping its plans of expansion covert, planning for the day when the Kings stay in Sacramento and Seattle is eventually rewarded with the league's 31st team, then this discussion over which market is better for the league won't ultimately matter.

Yet for now, and perhaps forever, that's not the case. Commissioner David Stern said last month at All-Star weekend in Houston that he didn't see a scenario in this saga where both cities wind up happy, which means this topic is front and center leading up to next month's Board of Governors meeting that will decide the outcome.

To that end, a group known as "Think Big Sacramento," which works in concert with Sacramento mayor and former NBA point guard Kevin Johnson, released a report on Tuesday detailing why it sees the Sacramento market as superior to Seattle's for NBA purposes.

All of which qualified as a good excuse to call sports marketing expert David Carter. The Los Angeles-based Carter is the director of the University of Southern California's Sports Business Institute and a respected, objective voice on matters such as these. But before we get to his view on the matter in the interview below, a recap on the state of affairs…

In order for Sacramento to keep its team, Johnson will need to convince 25% of the league's owners (in essence, eight) that the record-setting agreement from the Seattle group headed by hedge fund manager Chris Hansen and Microsoft CEO Steve Ballmer (a $525 million valuation for 65% of the team) should be denied. At that point, a Sacramento-based group can buy the team from the Maloof family, and keep the team where it has been since 1985. While a majority vote is needed to approve relocation, a 75% approval among owners is needed to approve a sale.

Johnson has coordinated the bid to buy the team and build a new downtown arena from 24-Hour Fitness Founder Mark Mastrov and billionaire supermarket mogul Ron Burkle. There also is another Sacramento group that includes minority Kings owner John Kehriotis claiming to have the funds and wherewithal to pull it off as well or perhaps join in as a united front.

The Mastrov bid is close to that of the Hansen-Ballmer group in terms of the financial amount of the offer, but no exact figures have been revealed. There are some complicated components – $77 million owed to the City of Sacramento from the Maloofs, the nonrefundable $30 million that was given to the Maloofs from Hansen-Ballmer on March 1 as a deposit – that could come into play. And while the arena plan that is being headed by Burkle isn't finalized yet, it is expected to be comparable to the one agreed on by the NBA, the Maloofs and the City of Sacramento a year ago that included approximately $255 million in public subsidies (the Maloofs backed out of the handshake deal last March).

Stern, who has called himself a mere adviser in this situation -- and who consistently understates his real influence in the matter -- made two other relevant realities clear in his most recent news conference.

• Seattle has nothing left to prove in terms of the legitimacy of its bid.

The Hansen-Ballmer group placed an exorbitant price tag on this flailing franchise that Forbes estimated to be worth $293 million in 2011. If approved, it would set a new league record in terms of the valuation of a franchise (the Golden State Warriors were sold for $450 million in 2010 to a group headed by Joe Lacob and Peter Guber). A relocation fee, which is determined arbitrarily by the owners and was $30 million when the Seattle SuperSonics were moved to Oklahoma City in 2008, is expected to be much higher this time.

Per the Hansen-Ballmer plan, the team would play in KeyArena for the first two seasons before moving to a new $490 million venue in the Sodo neighborhood. Hansen has headed the investment group that is planning the new building and involves a $200 million from the city of Seattle. The project is moving forward despite some local opposition from local longshoremen.

• The notion of the team staying in Sacramento, Stern said at the time, could happen.

"Oh, certainly it's plausible to me," he said. "But I don't have a vote. But I expect that the owners have a very open mind on this. And it isn't plausible yet to talk about it until predicates have been fulfilled."

Johnson, it should be noted, continues to operate with the sort of unending confidence that has everything to do with his relationship with Stern and the private assurances he has been given that his city's chance of keeping the team is very real.

Kehriotis, according to a person with knowledge of the situation, has spoken with Stern recently about his potential bid and has been encouraged by the NBA to move forward with his efforts. The person spoke to USA TODAY Sports on the condition of anonymity because the discussions were private.

The Maloofs, meanwhile, will certainly play a part here. If they can make more money by taking a Sacramento-based bid, then all's well that ends well for both sides. But for now, they continue to view the Hansen-Ballmer agreement as the primary bid and all others as, in essence, backup offers.

Stern is expected to give an updated statement about the situation on Friday when he meets with the media in Oakland, Calif. before Golden State's game against Houston. As a primer of sorts, a chat with Carter, who studies such matters for a living and was interesting as always. The following is an edited transcript of the interview.

Q: So do you see this (Think Big) report as a solid argument or subjective spin?

A: "It might be somewhere in between 12th hour posturing and being legitimate. Let's face it. For years, Sacramento has had ample opportunity to communicate the value of the market. They continue to talk about the value of the market, but they have their own track record. And the track record is that ownership has been a problem, lack of corporate presence is a problem, funding the (arena) is a problem. I think it's important to start comparing those markets, but there's a body of evidence in Sacramento that, for many years, gives you a pretty good idea of what that market is really like.

"Owners will be asking the question, 'In which market will the franchise value have the better chance to increase?' That's what I think these owners are all wrestling with. I don't think they're saying that Sacramento is an inherently bad market. I think they're saying, 'Where's the risk vs. return? Are we better off trying to maneuver into Seattle, even though – as Mayor Johnson was saying – Sacramento is the only show in town?' To me, that's always a backhanded compliment or statement to make – 'We're the only show in town.' The first thing I think of is, 'Wow, it must be a small town.' There will be competition for the entertainment dollar, and the sponsorship dollar in Seattle, but it's going to come down to the NBA to figure out where they think the bigger upside is…That's the fundamental debate."

Q: What do you make of the idea that the Sacramento offer – if it is, as has been indicated – is close to the Seattle offer and that they have some leeway with the city loan where they could creative with the terms and maybe even put more money in the Maloofs' pockets that way, what's your reaction to this counter-intuitive idea that any reasonable businessman would put that much money into that market?

A: "Well, neither one of us knows the details of each one of the offers. But the thing the NBA is going to look at is, 'How harmed is the Sacramento Kings brand, and is their franchise in that market?' If I'm going to buy that team at a premium in order to keep it there, how much time and energy and money do I have to spend in rehabilitating the image. Simply having the Maloofs out will probably go a long way for fans and sponsors, but ultimately once you settle into a steady state again down the road, the market hasn't fundamentally changed in terms of the size of the TV market, the size of the sponsor market. Maybe you're able to change what you can charge some of the tickets and luxury seating for if, in fact, you got a new venue that is in high demand. But other than that, you've got to make sure it pencils out. Otherwise, the NBA wakes up five years from now and they're still embroiled in a problem in Sacramento. They have got to avoid that."

Q: In terms of your uninvolved opinion, if you're just getting down to the brass tacks of 'Which market is better, business-wise, for the NBA?' How do you see it?

A: "That's a hard question to answer, because you have to go back to the individual owners. They want their assets, their franchise values to grow. And if they think Seattle is better, than they'll go that way. If they have individual concerns, are they going to horse trade boats to keep it in Sacramento?

"A lot of it is going to go beyond business. It will be relationships, the politics, and that sort of thing. I don't know that it would be appropriate to handicap it, but I'd be mildly surprised at this point if they remained in Sacramento. But mildly. You just don't know what is happening behind the scenes between Mayor Johnson and the league. You don't know to what extent other NBA owners are saying, 'Well we want to give this other group a shot, or we don't want to be abandoning markets.'"

Q: I've been hearing a few things about the public subsidy coming into play with Sacramento's offer, potentially around $255 million that they would put into the arena, and the idea that the NBA has concern about walking away from that type of public contribution – especially in California – where it's so tough to get public contributions. If they walk away from it, they lose a blueprint they'd like to use moving forward. Does that pass your smell test?

A: "That's a great observation. We've seen that with not just teams, but teams and venues throughout the state – from San Diego to obviously now Sacramento. The Bay Area is a good example, and LA has been at the center of it. These leagues want to be able to extract public subsidies, and if they don't do that then it gives other cities the opportunity to point the finger and say, 'Well they didn't kick in tax dollars over there, why should we here?

"If it's a quality, free-standing business that's going to be competitive in the marketplace, then it should be able to survive on its own. That would be one side of the argument. The other side of the argument, from these owners – and it's a good one – is that there are a lot of people who are enjoying our product and not paying directly for it. You have a sense of pride in your city, even if you don't attend a game or you don't watch too many of them on television. Someone needs to pay for that externality, for that benefit that the community is getting for having this company in town. You could argue that that subsidy is supposed to cover that benefit people are getting from having the team there. Maybe it's more of theoretical bump than anything else, but it's fair to say, 'What's Green Bay without the Packers?' That's truly a sports company town.

"Maybe if it's an amenity, or if it's a resource that a lot of people want and can identify with, then maybe people should be paying for someone living vicariously through their product but not paying for it."